Land & Industrial

By Alex Pulliam, NAI Maestas & Ward Land and Industrial Advisor

We are officially in the third quarter of 2020 and although uncertainly surrounding the COVID-19 Pandemic has adversely impacted some aspects of the real estate market, the industrial segment has remained resilient with plenty of active buyers still looking to acquire property.

A noteworthy trend we are seeing in the market is that more owner-users are looking to purchase property than lease. This pattern mainly is attributable to historically low-interest rates being offered to owner-user buyers by lenders. Owner-user buyers who purchase property with the intent to occupy at least 51% of the property can benefit from SBA (Small Business Administration) financing and are often considered strong banking candidates by conventional lenders. Having these options in financing is prompting many industrial users to explore lending scenarios and many are discovering they are more advantageous than leasing.

For example, a 6,000 square foot industrial building in Albuquerque could be listed at a sale price of $600,000. Using SBA lending terms of a 10% down payment, 3.75% interest rate, and a 25 year amortization- a monthly outlay including taxes & insurance could work out to $3,550 as shown below:

That same property could lease for $7.00/square foot as part of a NNN Lease structure. And although your initial costs to get into the space are much lower, the monthly payment is sharply more at $4,274. Below is a scenario detailing a $7.00/square foot + $1.55/square foot in NNN’s on that same 6,000 square foot property:

When you compare a monthly outlay of $3,550 to $4,274 you notice a blunt difference of $723 per month. That is a difference of $8,676 per year that could be reinvested into a company. These scenarios demonstrate that the economics of buying can be more favorable than leasing if a user has cash upfront to make a down payment.

This situation may not always be relevant but at this snapshot in time, we are witnessing an influx of buyers thanks to a favorable lending environment. Now, the hard part is coming up with suitable properties in a market starving for supply as we are faced with a historical vacancy rate of 2.78%.

In addition to Alex’s industrial insights, she is known for problem-solving with the right people to get the job done. She is committed to her goal of meeting deadlines and prioritizing her daily activities to exceed her client’s expectations.

For more information on other industrial property opportunities, contact Alex Pulliam.  

By Riley Mckee, NAI Maestas & Ward Industrial Real Estate Advisor. An article featured in the May 2020 Western Real Estate Business Magazine by NREI.com. 

If summarized in one word, New Mexico’s industrial real estate market can best be described as undersupplied. Steady increases in demand combined with a dearth of new construction have resulted in record low vacancy rates in Albuquerque, Las Cruces, and Santa Fe—the state’s primary metropolitan areas.

In Albuquerque, a string of noteworthy projects are underway. Ben E. Keith Foods, a Fort Worth based supplier of food products, is building a 260,000 square foot regional headquarters and distribution center to service markets throughout the region. FedEx Freight recently opened a 95,000 square foot distribution center strategically positioned on a 50-acre site to expedite planned expansions. Brunacini Development, the city’s largest industrial landlord, just completed a 140,000 square foot multi-tenant distribution center anchored by Bunzl, a London based food packaging distributor. Finally, and perhaps most notably, Kairos Power, a nuclear energy firm, acquired a 110,000 square foot research and development facility after a nationwide site selection process. It plans to expand the facility (which sits on 35 acres) as part of an incentive package agreed to with the state.

Las Cruces is seeing strong development activity as well, specifically in Santa Teresa, an international Port of Entry 21 miles south of the city. W. Silver Recycling, which processes nonferrous metals, recently announced plans for a 120,000 square foot facility touting the advantage of being located near markets in Mexico. Electrical wiring manufacturer Admiral Cable is expected to complete a 195,000 square foot facility this year on a site that is well suited for intermodal transport. A few miles south in Sunland Park, NM, Stampede Meat is in the process of renovating and expanding a processing facility previously owned by Tyson Foods.

This activity is certainly welcome, but it represents a drop in the bucket when compared to statewide demand for development of industrial space. Albuquerque’s vacancy rate is currently at a historic low, hovering between 2.5 and 3 percent since 2018. Most remaining available space is functionally obsolete, which some nimble developers have astutely retrofitted for users with urgent needs. Santa Fe’s market is even tighter—as of this writing, only 40,000 square feet of space is available.

While primary markets throughout the United States have enjoyed a consistent influx of new construction, New Mexico’s industrial real estate portfolio has not kept pace. This is partially a consequence of the state’s tertiary market nature but is also explained by its position relative to other states during economic cycles. Impacts of the last recession were not felt locally until several years after the fact while evidence of recovery has only recently become apparent. To investors and developers active in markets at their peak, this presents a compelling opportunity. New Mexico’s growth trajectory is only beginning.

Though COVID-19 has blindsided markets worldwide, industrial real estate users are expected to escape its most devastating impacts, unlike their retail and office counterparts. Demand for robust and efficient supply chains is as strong as ever.

To read the entire article from Western Real Estate Business Magazine (Pg. 29), click here

Riley McKee is an NAI Maestas & Ward commercial real estate specialist that advises industrial and logistics real estate owners and occupiers on leasing, acquisitions, and dispositions.  Learn more about Riley, his properties and his insights to market shifts in commercial real estate here. 

By Alex Pulliam, NAI Maestas & Ward Land and Industrial Advisor

Historically, the South Valley has held a reputation for being a less desirable submarket of Albuquerque but as the industrial real estate market witnesses a shrinking supply of suitable properties, the area has gained interest from active buyers. It is particularly attractive for industrial users looking for both large land area and sizeable warehouse buildings- as evidenced by the recent sale of 121 Dale Ave. SE, a 7,000 SF warehouse on 2.5 acres.

The building was originally marketed as a lease option, but interest came from buyers looking to occupy the space. After talks with its multinational corporate owner, it was determined that a sale option was the best path forward. Making the property available to purchase resulted in multiple offers leading to a “best and final offer” request. Ultimately, the purchaser was a local user looking to relocate and expand his trucking operations. The property went under contract in early January 2020 following two months of negotiations.

The buyer benefited from competitive SBA interest rates and the deal was slated to close in March. But when March came around, financial institutions faced direct impacts of COVID-19 as PPP Loans consumed lender’s time and resources. This caused significant delays in the transaction which finally closed in early June.

Granted the transaction took longer to close, the attractive SBA rates combined with the quality of the property were compelling enough for the buyer to remain engaged in the sale process. When the transaction closed, it sold at the high end of the market relative to other recent sales in the area. The buyer benefited from a feasible monthly outlay thanks to SBA rates and incentives.

Through the CARES Act the SBA continues to offer competitive rates, and buyers looking to purchase could benefit from the SBA making their first six payments. For owner-occupied buyers, this is an ideal time to consider purchasing if they can find the right property. For sellers, this is the ideal time to explore selling because there is a limited supply and demand for industrial property with key industrial traits remains high regardless of location.

In addition to Alex’s industrial insights, she is known for problem-solving with the right people to get the job done. She is committed to her goal of meeting deadlines and prioritizing her daily activities to exceed her client’s expectations.

For more details on this transaction and other industrial opportunities, contact Alex Pulliam or Riley McKee